Nvidia (NVDA) is one of the stocks that people are looking for the most on Zacks.com right now. So, you might want to look at some of the facts that could affect how the stock does in the next few weeks.
In the past month, shares of this company that makes graphics chips for AI and games have gone up 9.1%, while the Zacks S&P 500 average has gone down 1.3%. It has gone up 1.6% over this time, and Nvidia is part of the Zacks Semiconductor – General industry. The important question now is: Where might the stock go soon?
News or rumors about a big change in a company’s business prospects often send its stock “trending” and cause its price to change right away. However, there are always some basic facts that make people decide to buy or keep.
Changes to Estimates of Earnings
At Zacks, the most important thing for us is to look at how the prediction of a company’s future earnings has changed. That’s because we think the fair value of its stock is based on the present value of its future stream of earnings.
A big part of our research comes from how sell-side analysts who follow the stock are changing their estimates for earnings to reflect the most recent changes in the business world. When people think a company will make more money, the stock’s fair value also goes up. And investors tend to buy a stock when its fair value is higher than its present market price. This drives up the price of the stock. This is why real-world studies show a strong link between changes in earnings estimates and short-term changes in stock prices.
If everything goes as planned, Nvidia will make $3.24 per share this quarter, which is +458.6% more than the same quarter last year. In the past 30 days, the Zacks Consensus Estimate has gone up or down by +50.9%.
People think that the company will make $10.46 this fiscal year, which is +213.2% more than they did the previous year. This guess has changed +39.7% in the last 30 days.
Most people think that Nvidia will make $15.48 in earnings next fiscal year, which is +48% more than what they thought they would make last year. The guess has changed by +43.7% in the past month.
Our own stock rating tool, the Zacks Rank, has a strong history that has been checked by outside experts. It gives a more accurate picture of a stock’s price direction in the near future because it uses the power of revised earnings estimates very well. Nvidia has a Zacks Rank #1 (Strong Buy) because of the recent big change in the consensus estimate and three other reasons that also have to do with earnings estimates.
The following graph shows how the company’s forward 12-month consensus EPS projection has changed over time
EPS for 12 months
Estimated Sales Growth
Some people say that earnings growth is the best way to tell if a business is doing financially, but if a company can’t grow its sales, nothing really happens. For one thing, it’s almost impossible for a business to make more money without bringing in more money. That’s why it’s important to know how much a company could make in more sales.
Most people think that Nvidia will make $16.04 billion in sales this quarter, which is a rise of +170.5% year-over-year. There will be changes of +96.7% and +42.8% in the current fiscal year ($53.07 billion) and the next fiscal year ($75.79 billion).
The most recent results and a history of surprises
Nvidia made $13.51 billion in sales in the last quarter, which is a 1101.5% increase from the previous year. This year’s EPS was $0.51, while this year’s was $2.70.
It was a pleasant surprise that the company made +20.89% more than the Zacks Consensus Estimate of $11.17 billion. The surprise in EPS was +29.19%.
That’s three times in the last four quarters that Nvidia beat consensus EPS forecasts. The company always made more money than people thought it would during this time period.
Calculation of Value
You can’t make a good financial choice without looking at how much a stock is worth. One important thing that determines how a stock’s price will move in the future is how well its current price reflects the value of the business it represents and its growth possibilities.
Price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) multiples help you figure out whether a company’s stock is fairly valued, overvalued, or undervalued by comparing their current values to their historical values. On the other hand, comparing the company to its peers on these parameters gives you a good idea of how reasonable its stock price is.
A is better than a B, and so on. The Zacks Value Style Score, which is part of the Zacks Style Scores system, grades stocks from A to F based on both traditional and non-traditional valuation metrics. It’s a pretty good way to tell if a stock is overvalued, rightly valued, or temporarily undervalued.
If Nvidia gets a F on this, it means that its price is higher than its competitors. Click here to see how much some of the factors used to judge this grade were worth.
In the End
The facts we’ve talked about here and a lot of other data on Zacks.com can help you decide if it’s worth it to pay attention to the market buzz about Nvidia. With a #1 Zacks Rank, it may do better than the market as a whole in the near future.